The U.S. SEC has been granted an injunction by the Supreme Court of British Columbia, allowing the SEC to freeze assets belonging to five residents of British Columbia, Canada. The SEC has accused these individuals of being involved in a stock market fraud scheme worth over $1 billion.

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Zhiying Gasarch, Courtney Kelln, Jackson Friesen, Graham Taylor, and Fred Sharp were named in the suit, with Taylor and Sharp facing a hearing later this year due to scheduling conflicts.

The allegations against the group suggest that they illegally traded shares in hundreds of junior public-traded companies via offshore entities over an eight-year period.

While the SEC has called Sharp the “mastermind” of the scheme, a federal Massachusetts District Court Judge entered a default judgment against him for failing to respond to the claim.

Pre-judgement interest

The other defendants have claimed their innocence ahead of their upcoming U.S. court hearing. The SEC is seeking close to $41 million in assets and around $13.5 million in pre-judgement interest from the Defendants.

The B.C. Securities Commission has already issued a preservation order against the Defendants, freezing 114 trading accounts worth nearly $29 million. While the case is complex and international, the SEC is making headway in preventing these individuals from dispersing their assets.

The SEC has requested a freeze order on an $8.5 million Lake Country home, and a $3.1 million Vancouver home. The commission has also sought to freeze vehicles owned by the other Defendants.

SEC Trying To Local Assets

In addition, the SEC asked the Defendants to provide a sworn statement revealing all their assets, including those owned jointly with other parties or beneficially owned under a nominee. The commission admitted that it lacks a comprehensive understanding of all assets owned by the Defendants.

Sharp’s home in the wealthy district of the North Shore of Vancouver has not been targeted.

The Defendants have argued that the United States SEC lacks jurisdiction to impose an injunction in the British Columbia courts

They have also cited the Charter and U.S. Fifth Amendment claims in their defence. While the Defendants are fighting back, the SEC is pushing to freeze their assets in Canada to ensure that they cannot disperse them before the upcoming trial.

Freeze Canadian Assets

The Canadian Judge determined that the Court had the authority to provide assistance to a foreign proceeding and that the Fifth Amendment, which provides the right against self-incrimination, does not apply in civil cases.

The Judge also found that the British Columbia Securities Commission was authorized to impose preservation orders under the B.C. Securities Act, dismissing the claim that they were obtained without a warrant. Additionally, the Court found that the Defendants had not presented enough evidence to suggest that their Charter rights had been violated.

Alleged fraudulent activities of the defendants

The Judge recognized that the SEC had provided ample initial evidence of fraud and that the alleged fraudulent activities of the defendants posed a risk of asset dissipation. The fraud case is significant, involving more than 100 U.S. companies, with law firms in Vancouver having played a major role in the fraud.

Fred Sharp, a former Vancouver lawyer was found liable for repaying $21.8 million plus $7.2 million in interest. In response to a notice of civil claim, he has denied the SEC’s accusations. Despite the defendants’ arguments and claims of innocence, the SEC is working diligently to prevent them from dispersing their assets in advance of the upcoming trial.

The “Sharp Group,” an enterprise accused of facilitating pump-and-dump schemes, allegedly used an array of offshore shell companies to hide the identities of clients promoting U.S.-listed companies. The group’s tactics helped clients evade disclosure requirements as they fraudulently manipulated stock prices.

The group conducted stock transfers and money transmittals via an encrypted communications network. According to the SEC’s preliminary evidence, Sharp called the network “Q,” identified himself as Bond, and referred to Gasarch as “Wires.”

Sharp Group’s alleged illegal activities

The SEC has claimed that the Defendants were the Sharp Group’s “most significant” clients, responsible for over $140 million in illegal stock sales. The group’s alleged fraudulent documents were used to evade compliance officers at brokerage firms.

Sharp is currently fighting with the Canada Revenue Agency, which is investigating offshore bank accounts. The CRA made a criminal referral in 2013, alleging that Sharp’s business, Corporate House Group of Companies, was involved in a complex tax evasion scheme. In 2016, Corporate House’s arrangements were revealed in the Panama Papers leak.

The Sharp Group’s alleged illegal activities appear to have been complex and far-reaching, involving offshore shell companies and encrypted communications networks.

Previous Cases of the US SEC Going After Canadian Assets

Another case where the US SEC went after assets in Canada involved an alleged $15 million investment fraud scheme orchestrated by Canadian resident Harold Seigel.

In 2013, the SEC obtained a freeze order on Seigel’s assets and those of his investment company, HedgeLender LLC. The SEC claimed that Seigel had used investors’ money to pay for personal expenses, including a private jet and a $3 million home in Florida. The case resulted in Seigel being ordered to pay more than $16 million in penalties and disgorgement.

Freeze Canadian Assets

In 2010, the SEC filed a complaint against Canadian resident John Bravata, alleging that he had defrauded investors of more than $50 million through his company, Bravata Financial Group. The SEC obtained a freeze order on Bravata’s assets and those of his co-defendant Richard Trabulsy. Bravata was eventually ordered to pay more than $38 million in penalties and disgorgement.

These cases demonstrate the SEC’s willingness to pursue asset freezes in Canada in cases involving alleged securities fraud. While the legal process can be complex and lengthy, the SEC has shown a commitment to ensuring that defendants are held accountable for their actions and that victims are appropriately compensated.

I hope you found this article on how the United States can freeze Canadian assets interesting. If you need to find a lawyer in Canada, see our lawyer directory.

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SEC Has Power to Freeze Canadian Assets in Fraud Case